PEOPLE AND HISTORYThe population of Venezuela is comprised of a combination of European, indigenous, and African heritages. About 85% of the population lives in urban areas in the northern portion of the country. While almost half of Venezuela's land area lies south of the Orinoco River, this region contains only 5% of the population.

At the time of the Spanish discovery, the indigenous in Venezuela were mainly agriculturists and hunters living in groups along the coast, the Andean mountain range, and the Orinoco River. The first permanent Spanish settlement in South America--Nuevo Toledo--was established in Venezuela in 1522. Venezuela was a relatively neglected colony in the 1500s and 1600s as the Spaniards focused on extracting gold from other areas of the Americas.

Toward the end of the 18th century, the Venezuelans began to grow restive under colonial control. In 1821, after several unsuccessful uprisings, the country succeeded in achieving independence from Spain, under the leadership of its most famous son, Simon Bolivar. Venezuela, along with what are now Colombia, Panama, and Ecuador, was part of the Republic of Gran Colombia until 1830, when Venezuela separated and became a separate sovereign country.

Much of Venezuela's 19th-century history was characterized by periods of political instability, dictatorial rule, and revolutionary turbulence. The first half of the 20th century was marked by periods of authoritarianism--including dictatorships from 1908-35 and from 1950-58. In addition, the Venezuelan economy shifted after the first World War from a primarily agricultural orientation to an economy centered on petroleum production and export.

Since the overthrow of Gen. Marcos Perez Jimenez in 1958 and the military's withdrawal from direct involvement in national politics, Venezuela has enjoyed an unbroken tradition of civilian democratic rule. Until the 1998 elections, the Democratic Action (AD) and the Christian Democratic (COPEI) parties dominated the political environment at both the state and federal level.

GOVERNMENTCurrent President Hugo Chavez was elected in December 1998 on a platform that called for the creation of a National Constituent Assembly in order to write a new Constitution for Venezuela. Chavez's argument that the existing political system had become isolated from the people won broad acceptance, particularly among Venezuela's poorest classes, who had seen a significant decline in their living standards over the previous decade and a half. The National Constituent Assembly (ANC), consisting of 131 elected individuals, convened in August 1999 to begin rewriting the Constitution. In free elections, voters gave all but six seats to persons associated with the Chavez movement. Venezuelans approved the ANC's draft in a national referendum on December 15, 1999. The political system described below is that defined by the 1999 Constitution.

The president is elected by a plurality vote with direct and universal suffrage. The term of office is 6 years, and a president may be re-elected to a single consecutive term. The president appoints the vice president. He decides the size and composition of the cabinet and makes appointments to it with the involvement of the National Assembly. Legislation can be initiated by the executive branch, the legislative branch (either a committee of the National Assembly or three members of the latter), the judicial branch, the citizen branch (ombudsman, public prosecutor, and controller general) or a public petition signed by no fewer than 0.1% of registered voters. The president can ask the National Assembly to reconsider portions of laws he finds objectionable, but a simple majority of the Assembly can override these objections.

The National Assembly is unicameral, consisting solely of the Chamber of Deputies. Deputies serve 5-year terms, and may be re-elected for a maximum of two additional terms. These legislative agents are elected by a combination of party list and single member constituencies. When the Congress is not in session, its delegated committee acts on matters relating to the executive and in oversight functions.

The Constitution designates three additional branches of the federal government--the judicial, citizen, and electoral branches.

The judicial branch is headed by the Supreme Tribunal of Justice, which may meet either in specialized chambers (of which there are six) or in plenary session. The justices are appointed by the National Assembly and serve 12-year terms. Under the 1999 Constitution, the Supreme Tribunal of Justice is composed of 20 justices. The 1999 Constitution was amended in 2004, and the total number of justices was expanded by 12 to a total of 32. As of November 1, 2004, the National Assembly was in the process of selecting candidates to fill the 12 new seats. The judicial branch also consists of lower courts, including district courts, municipal courts, and courts of first instance.

The citizens branch consists of three components--the prosecutor general ("fiscal general"), the "defender of the people" or ombudsman, and the comptroller general. The holders of these offices, in addition to fulfilling their specific functions, also act collectively as the "Republican Moral Council" to challenge before the Supreme Tribunal actions they believe are illegal, particularly those which violate the Constitution. The holders of the "citizen power" offices are selected for terms of 7 years by the National Assembly.

The "Electoral Power," otherwise known as the National Electoral Council, is responsible for organizing elections at all levels. Its five members are also elected to 7-year terms by the National Assembly.

NATIONAL SECURITYIn 2000, the armed forces enlisted 87,500 individuals in four service branches--the Army, Navy (including the Marine Corps), Air Force, and the Armed Forces of Cooperation (FAC), commonly known as the National Guard. In 2001, a civilian was appointed Minister of Defense for the first time in many decades. His role is largely policy-oriented, and operational command remains with a uniformed services commander.

Principal Government OfficialsPresident--Hugo Chavez FriasForeign Minister--Jesus Arnoldo PerezAmbassador to the United States--Bernardo Alvarez HerreraAmbassador to the United Nations--Fermin Toro JimenezAmbassador to the OAS--Jorge Valero Brice�o

The Venezuelan embassy in the United States is located at 1099 30th St. NW, Washington, DC 20007 (tel. (202) 342-2214). In addition to Washington, D.C. Venezuela maintains consulates in Boston, Chicago, Houston, Miami, New Orleans, New York, San Francisco, and Puerto Rico.

POLITICAL CONDITIONSVenezuela's history of free and open elections since 1958 and its prohibition of military involvement in national politics had earned it a reputation as one of the more stable democracies in Latin America.

This prevailing political calm came to an end in 1989, when Venezuela experienced riots in which more than 200 people were killed--the so-called Caracazo--in response to an economic austerity program launched by then-President Carlos Andres Perez. Subsequently, in February 1992, a group of army lieutenant colonels led by future President Hugo Chavez mounted an unsuccessful coup attempt, claiming that the events of 1989 showed that the political system no longer served the interests of the people. A second, equally unsuccessful coup attempt by other officers followed in November 1992. A year later, Congress impeached Perez on corruption charges.

Deep popular dissatisfaction with the traditional political parties, income disparities, and economic difficulties were some of the major frustrations expressed by Venezuelans following Perez's impeachment. In December 1998, Hugo Chavez Frias won the presidency after campaigning for broad reform, constitutional change, and a crackdown on corruption.

In July 2000, following a long and controversial process, voters re-elected President Hugo Chavez of the Fifth Republic Movement (MVR) in generally free and fair national and local elections. The MVR and pro-Chavez Movimiento a Socialismo (MAS) party won 92 seats in the 165-member legislature. Subsequent party splits reduced the pro-Chavez members to 84 seats.

In April 2002, the country experienced a temporary alteration of constitutional order. When an estimated 400,000 to 600,000 persons participated in a march in downtown Caracas to demand President Chavez' resignation, gunfire broke out, resulting in as many as 18 deaths and more than 100 injuries on both sides. Military officers took President Chavez into custody, and business leader Pedro Carmona swore himself in as interim President. On April 14, military troops loyal to Chavez returned him to power. In an effort to promote national reconciliation, the Tripartite Group was formed in August 2002 to facilitate dialogue between the government and the opposition. The group included representatives from the Organization of American States, the UN Development Program, and the Carter Center. Formal direct talks between government and opposition dialogue representatives began in November 2002. Continued dissatisfaction with the Chavez administration led to a national work stoppage on December 2, 2002. Strikers protested the government and called for the resignation of President Chavez. On December 4, 2002, the petroleum sector joined the strike. Other sectors of the economy also joined the work stoppage and effectively shut down all economic activity for a month. The OAS Permanent Council passed Resolution 833 on December 16, 2002, calling for a "constitutional, democratic, peaceful, and electoral solution" to the crisis in Venezuela.

In January 2003, the OAS established the Group of Friends of the OAS Secretary General's Mission for Venezuela group. The Friends, coordinated by Brazil, include Chile, Spain, Portugal, Mexico, and the United States. The Friends met in January 2003 and visited Caracas to facilitate a peaceful resolution to the political crisis. Despite increased tensions during the national strike, dialogue facilitated by the Tripartite Group resulted in a nonviolence pledge by all parties in February 2003 as the strike was drawing to a close. After months of negotiations facilitated by OAS Secretary General Gaviria, the Venezuelan Government and the opposition's Democratic Coordinating Committee signed an agreement on May 29, 2003, which sets the framework for a possible recall referendum on President Chavez' continued tenure in office. The recall referendum is allowed in the Venezuelan Constitution.

In February 2003, opposition supporters coordinated a nationwide effort collecting 3.2 million signatures for possible recall referenda, including constitutional issues and a presidential recall. The newly appointed National Electoral Council (CNE) ruled in September 2003 that the signatures were collected prematurely (before the President's mid-term in office in accordance with the Constitution) and that a new signature collection effort would be necessary for possible recall referenda. Opposition supporters and pro-Chavez MVR members petitioned the CNE for the right to collect signatures for possible recall referenda. The CNE set the dates for the MVR collection effort for November 21-24, 2003, and the opposition effort for November 28-December 1, 2003.

During their signature drive, the opposition collected 3.4 million signatures. However, after reviewing the opposition petition for 2 months, the CNE determined in February that 1.5 million of the total signatures were either invalid or of questionable authenticity. Several months of intense deliberations culminated in a highly controversial signature verification process from May 28-30. During this process, the opposition validated enough signatures to trigger a national referendum on the mandate of President Hugo Chavez.

Venezuela's presidential recall referendum was held August 15, 2004. Following 2 months of extensive campaigning efforts, President Chavez won 59% of the vote. President Chavez's opponents immediately contested that the results of the referendum were marked by electoral fraud. However, international electoral observation missions carried out by the Organization of American States and the Carter Center found no indication of systemic fraud.

On October 31, 2004, Venezuela held gubernatorial and mayoral elections nationwide. Following an upsurge in political support for President Chavez after the recall referendum, pro-GOV candidates won control of 20 out of a total 22 state governor positions. (This figure reflects preliminary results announced by the CNE as of November 2, 2004.)

ECONOMYPolitical instability has had serious effects on the performance of the Venezuelan economy, with a sharp drop in investment and a general recession during 2002 and 2003. Total GDP decreased 18.5% during the first semester of 2003 compared with the same period in 2002. This is the steepest decline in Venezuelan history. The hardest hit sectors were construction (-55.9%), petroleum (-26.5%), commerce (-23.6%), and manufacturing (-22.5%).

In 2002, the Venezuelan economy, as measured by GDP, contracted by 8.9% compared to 2001. The petroleum sector, which contracted by 12.6% in 2002 as compared to 2001, was adversely affected by a decrease in exports of petroleum products resulting from adherence to an OPEC quota established in 2002 and the virtual cessation of exports as a result of the national work stoppage that began in December 2002. The nonpetroleum sector of the economy contracted by 6.5% compared to 2001. This situation was accompanied by a significant devaluation of the Bolivar during 2002, which resulted in an accelerated inflation rate. The inflation rate, as measured by the CPI, was 31.2% in 2002 compared to 12.3% in 2001.

In an attempt to support the bolivar and bolster the government's declining level of international reserves, as well as to mitigate the adverse impact from the oil industry work stoppage on the financial system, the Ministry of Finance and the Central Bank suspended foreign exchange trading on January 23, 2003. On February 6, 2003, the government created CADIVI, a currency control board charged with handling foreign exchange procedures. The new exchange control regime fixed the U.S. dollar exchange rate at Bs. 1,596= U.S. $1.00 for purchase operations, and Bs. 1,600=U.S. $1.00 for sale operations, and established the compulsory purchase and sale of foreign currency through the Central Bank.

While Macroeconomic Stabilization Fund (FIEM) decreased from U.S.$2.59 billion in January 2003 to U.S.$700 million in October, Central Bank-held international reserves actually increased from U.S.$11.31 billion in January to U.S.$19.67 billion in October 2003. Despite the slowdown in PDVSA output and resulting royalty payments to the Central Bank, reserves are currently 31.1% above their levels one year ago, as foreign exchange transactions remain suppressed.

There is considerable income inequality. According to official sources, the percentage of poor and extremely poor among Venezuelan population increased from 39.4% in 1995 to 48.1% in 2002. This increase has been due primarily to lower real wages earned by employees and increased unemployment.

Petroleum And Other ResourcesEconomic prospects remain highly dependent on oil prices and the exportation of petroleum. A founding member of the Organization of Petroleum Exporting Countries (OPEC), Venezuela reasserted its leadership within the organization during its year as OPEC's president, hosting the organization's Second Leadership Conference in 40 years, as well as having its former Minister of Energy, Alvaro Silva Calderon, appointed as Secretary General. The collapse of oil prices in 1997-98 prompted the Chavez administration to expand OPEC-inspired production cuts in an effort to raise world oil prices. In 2002, this sector accounted for roughly a quarter of GDP, 73% of export earnings, and about half of central government's operating revenues. Venezuela is the fourth-leading supplier of imported crude and refined petroleum products to the United States.

The Government of Venezuela has opened up much of the hydrocarbon sector to foreign investment, promoting multi-billion dollar investment in heavy oil production, reactivation of old fields, and investment in several petrochemical joint ventures. Almost 60 foreign companies representing 14 different countries participate in one or more aspects of Venezuela's oil sector. The Venezuelan national oil company Petroleos de Venezuela, S.A. (PDVSA) and foreign oil companies have signed 33 operating contracts for marginal fields in three bidding rounds. New legislation dealing with natural gas and petrochemicals is further opening the sector. A new domestic retail competition law, however, disappointed investors who had been promised market-determined prices.

On November 13, 2001, under the enabling law authorized by the National Assembly, President Chavez enacted the new Hydrocarbons Law, which came into effect in January 2002. This law replaced the Hydrocarbons Law of 1943 and the Nationalization Law of 1975. Among other things, the new law provided that all oil production and distribution activities were to be the domain of the Venezuelan state, with the exception of joint ventures targeting extra-heavy crude oil production. Under the new Hydrocarbons Law, private investors can own up to 49% of the capital stock in joint ventures involved in upstream activities. The new law also provides that private investors may own up to 100% of the capital stock in ventures concerning downstream activities, in addition to the 100% already allowed for private investors with respect to gas production ventures, as previously promulgated by the National Assembly.

During the December 2002-February 2003 general strike, petroleum production and refining by PDVSA almost ceased. Despite the strike, these activities eventually were substantially restarted. Out of a total of 45,000, 19,000 PDVSA management and workers were subsequently dismissed because the government asserted they had abandoned their jobs during the strike.

A range of other natural resources, including iron ore, coal, bauxite, gold, nickel, and diamonds are in various stages of development and production. In April 2000, Venezuela's President decreed a new mining law, and regulations were adopted to encourage greater private sector participation in mineral extraction.

Venezuela utilizes vast hydropower resources to supply power to the nation's industries. The national electricity law is designed to provide a legal framework and to encourage competition and new investment in the sector. After a 2-year delay, the government is proceeding with plans to privatize the various state-owned electricity systems under a different scheme than previously envisioned.

Manufacturing, Agriculture, and TradeManufacturing contributed 14% of GDP in 2002. Manufacturing output decreased by 11% in 2002. The manufacturing sector continues to decrease, and remains hindered by a marked lack of private investment. Venezuela manufactures and exports steel, aluminum, textiles, apparel, beverages, and foodstuffs. It produces cement, tires, paper, fertilizer, and assembles cars both for domestic and export markets.

Agriculture accounts for approximately 5% of GDP, 10% of the labor force, and at least one-fourth of Venezuela's land area. Venezuela exports rice, cigarettes, fish, tropical fruits, coffee, cocoa, and manufactured products. The country is not self-sufficient in most areas of agriculture. Venezuela imports about two-thirds of its food needs. In 2002, U.S. firms exported $347 million worth of agricultural products, including wheat, corn, soybeans, soybean meal, cotton, animal fats, vegetable oils, and other items to make Venezuela one of the top two U.S. markets in South America. The United States supplies more than one-third of Venezuela's food imports.

Thanks to petroleum exports, Venezuela usually posts a trade surplus. In recent years, nontraditional (i.e., nonpetroleum) exports have been growing rapidly but still constitute only about one-fourth of total exports. The United States is Venezuela's leading trade partner. During 2002, the United States exported $4.4 billion in goods to Venezuela, making it the 25th-largest market for the U.S. Including petroleum products, Venezuela exported $15.1 billion in goods to the U.S., making it our 14th-largest source of goods. Venezuela has taken a very cautious approach toward the proposed Free Trade Agreement of the Americas.

Labor and InfrastructureVenezuela's labor force of about 12.05 million is growing faster than total employment. In August 2003, official unemployment was 17.8%, but unofficial estimates are over 20%. The public sector employs about 15% of the work force, while less than1% work in the capital-intensive oil industry. About 18%of the labor force is unionized, and unions are particularly strong in the petroleum and public sectors. The "informal" sector accounts for some 53% of the work force or 6.4 million people.

In December 2000, international labor authorities declared that the Chavez administration violated freedom of association by using a public referendum to decide internal labor leadership issues. Since then, however, the government has consulted regularly with the International Labor Organization (ILO) in its ongoing effort to reform and reorganize the country's labor structure, including a multi-union dialogue and the preparation of a new labor law.

Venezuela has an extensive road system. With the exception of air service, transportation has failed to keep pace with the country's needs. Much of the infrastructure suffers from inadequate maintenance. Caracas has a modern subway but only one functioning rail line serves the rest of the country.

FOREIGN RELATIONSVenezuela's priorities in the international arena are:

Respect for human rights;

The right of all people to self-determination;

Nonintervention in the internal affairs of other nations;

Peaceful settlement of disputes between nations, including border disputes;

The right of all people to peace and security; and

Support for democracy.

Hemispheric cooperation and integration are two pillars of President Chavez's foreign policy. Venezuela worked closely with its neighbors following the 1997 Summit of the Americas in many areas--particularly energy integration--and championed the OAS decision to adopt an Anti-Corruption Convention. Venezuela also participates in the UN Friends groups for Haiti. It is pursuing efforts to join the MERCOSUR trade bloc to expand the hemisphere's trade integration prospects. The Venezuelan Government advocates an end to Cuba's isolation and a "multi-polar" world based on ties among Third World countries.

Venezuela has longstanding border disputes with Colombia and Guyana but seeks to resolve them peacefully. Bilateral commissions have been established by Venezuela and Colombia to address a range of pending issues, including resolution of the maritime boundary in the Gulf of Venezuela. Relations with Guyana are complicated by Venezuela's claim to roughly three-quarters of Guyana's territory. Since 1987, the two countries have held exchanges on the boundary under the "good offices" of the United Nations.

U.S.-VENEZUELAN RELATIONSMajor U.S. interests in Venezuela include promotion of U.S. exports and protection of U.S. investment, continuation of the economic reform program, preservation of Venezuela's constitutional democracy, closer counternarcotics cooperation, and continued access to a leading source of petroleum.

U.S.-Venezuelan commercial ties are close. The United States is Venezuela's most important trading partner, representing about half of both imports and exports. In turn, Venezuela is the United States' third-largest export market in Latin America, purchasing U.S. machinery, transportation equipment, agricultural commodities, and auto parts. Venezuela's opening of its petroleum sector to foreign investment in 1996 created extensive trade and investment opportunities for U.S. companies. As a result, Venezuela is one of the top four suppliers of foreign oil to the United States. The Department of State is committed to promoting the interests of U.S. companies in overseas markets. For contact information and a list of government publications, please go to the end of this document.

Venezuela is a minor source country for opium poppy and coca but a major transit country for cocaine and heroin. Money laundering and judicial corruption are major concerns. The United States is working with Venezuela to combat drug trafficking.

In June 2004, Venezuela was listed at Tier 3 status in the State Department's Report on Trafficking in Persons. Tier 3 status indicates a perceived lack of effort to combat human trafficking.

Approximately 23,000 U.S. citizens living in Venezuela have registered with the U.S. embassy, an estimated three-quarters of them residing in the Caracas area. An estimated 12,000 U.S. tourists visit Venezuela annually. About 500 U.S. companies are represented in the country.

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